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In a rare course correction, the Federal Trade Commission (FTC) has reopened and vacated its 2024 consent order against Rytr LLC, a generative AI-powered company. The unusual move reflects a significant strategic reset of how federal regulators will approach AI technology, especially when alleged harms are hypothetical rather than concrete.
In 2024, the FTC filed an administrative complaint against Rytr, a company that sold an AI-powered writing assistant service that could generate testimonials and customer reviews. The FTC alleged that the AI-powered tool could generate reviews and testimonials that were not related to the user's actual inputs or experience, and such reviews could therefore be deceptive.
The FTC challenged the conduct as unfair under Section 5, and as providing the means and instrumentalities for others to make deceptive statements. The final consent order was entered in December 2024, and it included a categorical ban on Rytr from providing any AI-powered service dedicated to consumer reviews or testimonials. Commissioner, now chairman, Andrew Ferguson, dissented from the votes issuing the complaint and approving the settlement.
FTC Reverses Course on AI Regulation
But after reviewing the case under the Trump administration's Artificial Intelligence Executive Order and America's AI Action Plan, the FTC has now concluded that its original complaint against Rytr failed to adequately allege a violation of Section 5. In other words, the agency has determined that the facts alleged in the complaint did not support a finding of unfair or deceptive conduct.
The FTC also acknowledged that the remedy it imposed, a categorical ban preventing Rytr from offering any AI service capable of generating reviews or testimonials, went too far. The agency found that because the order imposed an unjustified burden on innovation in a young and rapidly evolving AI market, it is in the public interest to set the 2024 order aside.
At the heart of the reversal is the principle that technological tools are not illegal simply because they could be misused. According to Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, "condemning a technology or service simply because it potentially could be used in a problematic manner is inconsistent with the law and ordered liberty."
The original enforcement action rested on the idea that Rytr's AI could be used to generate fake online reviews. But the FTC now recognizes that potential misuse, without evidence of fraud or tangible consumer harm, is not enough to justify sweeping prohibitions, especially when those prohibitions effectively shut down entire categories of lawful AI functionality. Rytr agreed to the vacatur of the order and waived any procedural objections, allowing the FTC to formally set aside the prior decision by a unanimous 2–0 vote.
What the Rytr Decision Signals for AI Enforcement
The reversal marks a meaningful shift in regulatory posture. It suggests a move away from preemptive bans on AI capabilities and toward a more traditional, evidence-based enforcement model, one that distinguishes between harmful conduct and neutral technology.
At the same time, the FTC emphasized that this decision does not signal a retreat from AI enforcement altogether. The agency remains committed to pursuing actors who use AI to deceive consumers or violate existing laws, and AI-powered companies and marketers should continue to be wary of the potential for consumer deception within a rapidly evolving technology. What this case clarifies, however, is that AI enforcement will focus on actual misconduct, not speculative risk.
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